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Yes, Taxes Do Matter

July 15, 2009

It is easy to find evidence that California is in a funk:

  • At the start of this month the once golden state started paying creditors, including those owed tax refunds, business suppliers and students expecting grants, in IOUs.
  • California’s governor, Arnold Schwarzenegger, also said that the gap between projected outgoings and income for the current fiscal year has leapt to a horrible $26 billion.
  • California’s unemployment rate is running at 11.5 percent, two points ahead of the national average.
  • Its roads and schools are crumbling; every year, over 100,000 more Americans leave the state than enter it.

Indeed, high taxes, coupled with intrusive regulation of business and greenery taken to silly extremes, have gradually strangled what was once America’s most dynamic state economy.  Chief Executive magazine, to take just one example, has ranked California the very worst state to do business in for each of the past four years.

By contrast, Texas appears to be much better off, says the Economist:

  • It has coped well with the recession, with an unemployment rate two points below the national average and one of the lowest rates of housing repossession.
  • It has no state capital gains or income tax, and a business-friendly and immigrant-tolerant attitude.
  • It is home to more Fortune 500 companies than any other state — 64 compared with California’s 51 and New York’s 56.

Source: Editorial, “California v. Texas: America’s Future,” Economist, July 9, 2009.

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